Medica Group Plc (LON:MGP) is about to trade ex-dividend in the next 4 days. You can purchase shares before the 24th of September in order to receive the dividend, which the company will pay on the 23rd of October.
Medica Group's next dividend payment will be UK£0.0085 per share, and in the last 12 months, the company paid a total of UK£0.017 per share. Looking at the last 12 months of distributions, Medica Group has a trailing yield of approximately 1.3% on its current stock price of £1.27. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. That's why we should always check whether the dividend payments appear sustainable, and if the company is growing.
Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Medica Group has a low and conservative payout ratio of just 20% of its income after tax. A useful secondary check can be to evaluate whether Medica Group generated enough free cash flow to afford its dividend. It paid out 9.7% of its free cash flow as dividends last year, which is conservatively low.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. Investors love dividends, so if earnings fall and the dividend is reduced, expect a stock to be sold off heavily at the same time. It's encouraging to see Medica Group has grown its earnings rapidly, up 24% a year for the past five years. Medica Group looks like a real growth company, with earnings per share growing at a cracking pace and the company reinvesting most of its profits in the business.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last three years, Medica Group has lifted its dividend by approximately 16% a year on average. It's great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Is Medica Group an attractive dividend stock, or better left on the shelf? It's great that Medica Group is growing earnings per share while simultaneously paying out a low percentage of both its earnings and cash flow. It's disappointing to see the dividend has been cut at least once in the past, but as things stand now, the low payout ratio suggests a conservative approach to dividends, which we like. Medica Group looks solid on this analysis overall, and we'd definitely consider investigating it more closely.
In light of that, while Medica Group has an appealing dividend, it's worth knowing the risks involved with this stock. In terms of investment risks, we've identified 1 warning sign with Medica Group and understanding them should be part of your investment process.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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